Yangzijiang reports 2Q19 net profit fell 6 percent, issues positive outlook

Yangzijiang Shipbuilding reported Monday its second quarter net profit fell 6 percent on-year to 936.43 million yuan (S$183.79 million or US$132.94 million), with the shipbuilder attributing the decline to an “exceptionally strong” year-ago performance.

Revenue for the quarter ended 30 June declined 12 percent on-year to 7.03 billion yuan, the shipbuilder said in a filing to SGX.

For the first half, Yangzijiang reported net profit rose 11 percent on-year to 1.76 billion yuan, coming in at around 60 percent of Daiwa’s full-year forecast for 2.95 billion yuan. Revenue for the first half came in at 13.32 billion yuan, up 3 percent on-year, the shipbuilder said.

The core shipbuilding segment posted revenue of 3.1 billion yuan for the second quarter on the delivery of 18 vessels, down from 5.2 billion yuan, with 20 vessels delivered, in the year-ago period.

The trading business posted revenue of 3.2 billion yuan for the quarter, up from 2.2 billion yuan in the year-ago period.

Other shipbuilding related businesses, such as shipping logistics and chartering and ship design services, posted revenue of 179 million yuan for the quarter, up from 133 million yuan in the year-ago period.

The company issued a  positive outlook.

“Despite the market uncertainties in the near term, the group remains positive on the demand for innovative, energy-efficient and green vessels,” Yangzijiang said. “In view of the group’s robust financial position, its stringent risk management, strong delivery track record and a stable, sizable outstanding order book, the board remains confident of the group’s stable operational and financial performance for the financial year.”

Yangzijiang said it obtained five new orders in the first half with a contract value of US$209 million amid an industry-wide new order drought, but it added it expected the market to recover as the Baltic Dry Index has rebounded and sentiment has improved.

“Shipowners’ sentiments fell due to multiple factors, including less-bullish outlook on economic and trade growth and uncertainties associated with the forthcoming IMO rules on emissions,” the filing said. “The dam disaster at Vale, lower iron ore import from China in
early 2019, and major iron ore producers cutting production outlook caused the nosedive in the Baltic Dry Index in the first quarter of 2019 and weighed on market sentiments.”

But it added, in the second quarter, the BDI staged a strong rebound and the off-service time required to install scrubbers on vessels to meet the IMO 2020 rule will reduce the fleet size on the market and support charter rates. That’s expected to help shipowners rebuild confidence, and spur more ordering activity, it said.

The outstanding order book was at US$3.1 billion at end-June, which is expected to provide a stable revenue stream for the next 18 months, Yangzijiang said.

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